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Latest Results & Outlook

   

Highlights

  • DSM reports another strong quarter
  • Group sales up at €1,998m, with 3% organic growth, and EBITDA up 13% to €323m
  • Nutrition: 5% organic sales growth, EBITDA up 8%
  • Materials: 5% volume growth, EBITDA up 16%
  • Group ROCE improved to 10.6% (end Q3 2015: 7.9%) driven by higher EBIT
  • Net profit up 38% to €146m (€322m after exceptionals, including proceeds from Patheon IPO)
  • Outlook maintained

Key figures and indicators (continuing operations)

in € million Q3 2016 Q3 2015 % change
vol. price/
mix
FX
other
Sales 1,998 1,945 3% 3% 0% 0% 0%
Nutrition 1,303 1,253 4% 3% 2% -1% 0%
Materials 634 631 0% 5% -5% -1% 1%
EBITDA 323 287 13%        
Nutrition 231 213 8%        
Materials 118 102 16%        
ROCE (%)1 10.6 7.9          

1) January until September

CEO statement

Feike Sijbesma, CEO/Chairman of the DSM Managing Board, commented: “We are pleased to report another quarter of strong operational and financial progress. This was driven by both Materials and Nutrition, reflecting the progress we are making on delivering on our Strategy 2018 through our growth initiatives as well as ambitious improvement and cost savings actions.

Materials had a quarter of strong volume growth driven again by specialties, enhanced by particularly high margins as a result of a very favorable product mix and pro-active margin management, while still benefiting from low input costs. Nutrition delivered good EBITDA growth, despite additional costs in the quarter. Animal Nutrition benefited from increased vitamin prices, with solid volume growth against a tougher prior year comparison. Human Nutrition delivered strong volume growth.

While the global macro-economic environment remains a concern, we continue to expect that for the full year 2016, we will deliver ahead of our medium-term goals, given the strong ongoing performance of our business, underpinned by our continued focus on the improvement programs.”

Outlook 2016 maintained

DSM continues to expect to deliver full-year 2016 results ahead of the medium-term targets set out in its Strategy 2018, with a mid-teens EBITDA growth and an increase in ROCE of over 200 basis points.

Key figures and indicators (cont’d)

in €
million
Q3 2016 Q3 2015 % change
vol. price
/mix
FX
other
Sales - Continuing Operations 1,998 1,945 3% 3% 0% 0% 0%
Nutrition 1,303 1,253 4% 3% 2% -1% 0%
Materials 634 631 0% 5% -5% -1% 1%
Innovation Center 43 42 2% 2% 0% 0% 0%
Corporate Activities 18 19          
Discontinued Operations 0 157          
in €
million
01-09
/2016
01-09
/2015
% change
vol. price
/mix
FX
other
Sales - Continuing Operations 5,905 5,796 2% 5% -1% -2% 0%
Nutrition 3,848 3,699 4% 5% 1% -3% 1%
Materials 1,874 1,927 -3% 3% -6% -1% 1%
Innovation Center 126 115 10% 10% 0% -1% 1%
Corporate Activities 57 55          
Discontinued Operations 0 1,213          
in €
million
Q3 2016 Q3 2015 % change
01-09
/2016
01-09 /2015 % change
Sales - Continuing Operations 1,998 1,945 3% 5,905 5,796 2%
Nutrition 1,303 1,253 4% 3,848 3,699 4%
Materials 634 631 0% 1,874 1,927 -3%
Innovation Center 43 42 2% 126 115 10%
Corporate Activities 18 19   57 55  
Discontinued Operations 0 157   0 1,213  
EBITDA - Continuing Operations 323 287 13% 947 814 16%
Nutrition 231 213 8% 693 616 13%
Materials 118 102 16% 330 294 12%
Innovation Center 1 0   2 -8  
Corporate Activities -27 -28   -78 -88  
Discontinued Operations 0 3   0 94  
EBITDA margin - Continuing Operations 16.2% 14.8%   16.0% 14.0%  
EBIT - Continuing Operations 205 170 21% 601 458 31%
Capital Employed - Continuing Operations1       7,620 7,558  
Average Capital Employed1       7,561 7,757  
ROCE - Continuing Operations (%)2       10.6% 7.9%  
Profit for the period, before exceptional items - Cont. Ops. 146 106 38% 390 285 37%
Profit for the period, after exceptional items - Total DSM 322 33   542 63  
Net EPS before exceptional items - Cont. Ops. 0.81 0.59 37% 2.17 1.61 35%
Net EPS after exceptional items - Total DSM 1.82 0.19   3.04 0.33  
Cash Flow - Continuing Operations 325 300   644 487  
Capital Expenditures - Continuing Operations3 128 113   305 321  
Net debt1       2,054 2,3214  

1) Before reclassification to held for sale
2) ROCE calculated based on weighted average capital employed
3) Cash, net of customer funding
4) Year-end 2015

In this report:
a) 'Organic sales growth’ is the total impact of volume and price/mix;
b) ‘Discontinued operations’ comprises net sales and operating profit (before depreciation and amortization) of DSM Fibre Intermediates and DSM Composite Resins up to and including 31 July 2015;
c) ‘Total Working Capital’ refers to the total of ‘Operating Working Capital’ and ‘non-Operating Working Capital’.

Review by cluster

Nutrition

in €
million
Q3 2016 Q3 2015 % change
01-09 /2016 01-09
/2015
% change
Sales 1,303 1,253 4% 3,848 3,699 4%
EBITDA
231 213 8% 693 616 13%
EBITDA margin (%) 17.7% 17.0%   18.0% 16.7%  
EBIT
159 146 9% 485 412 18%
Capital Employed       5,384 5,247  
Average Capital Employed       5,334 5,316  
ROCE (%)       12.1% 10.3%  
Total Working Capital
      1,492 1,413  
Total Working Capital as % of Sales1       28.6% 28.2%  

1) Annualized last quarter sales

Q3 2016 sales increased by 4% compared to Q3 2015, with a good organic sales growth of 5%. Volumes were up by 3% and price/mix up 2%, driven by higher vitamin prices. Exchange rates had a 1% negative impact on sales, mainly due to a slightly weaker US dollar.

Q3 2016 EBITDA was €231 million, up 8% compared to Q3 2015, as a result of good organic growth and the effects of the improvement programs, despite higher costs related to marketing & sales campaigns in human nutrition and the costs related to the maintenance shut downs in vitamin E and vitamin C. The vitamin C plant in China had an extended shut down for improvement projects.

Q3 2016 EBITDA margin was 17.7% compared to 17.0% in the same period last year, reflecting the good organic growth, supported by the progress made on the improvement programs. The margin was slightly below Q2 2016 (18.3%), as a result of higher costs in the quarter as mentioned above.

Animal Nutrition & Health

Q3 2016 sales in animal nutrition delivered 7% organic growth, with 2% volume growth and 5% improvement in price/mix compared to Q3 2015.

Volume growth of 2% was achieved against the background of strong comparative figures in 2015 (10% volume growth). Good growth was realized in premix, carotenoids and feed enzymes. Tortuga volumes were only down slightly, which was a good performance considering the tough market conditions in Latin America. Market conditions remained good in North America, Asia and Europe.

Prices showed a 5% increase versus the same period last year, driven by higher vitamin and premixes prices.

Human Nutrition & Health

Q3 2016 organic sales growth in human nutrition was 4% compared to Q3 2015, driven by 5% higher volumes. Price/mix was slightly down.

  • Food & beverage performed well, driven by good sales volumes in Asia and Europe.
  • Dietary Supplements sales to North America remained relatively weak, both in multi-vitamins and fish-oil based omega-3. Outside North America, sales of these products continued to show good growth.
  • i-Health delivered strong volume growth in Q3 2016 supported by marketing & sales campaigns.
  • Infant Nutrition continued to perform well, with solid volume growth in Q3. New regulations in China have brought some volatility to the market.

Food Specialties

The Food Specialties businesses delivered flat organic growth. Hydrocolloids as well as enzymes continued to deliver good growth, although some capacity constraints prevented the enzymes business from fully benefiting from continued strong customer demand. These were however offset by lower sales in the other product lines.

Materials

in €
million
Q3 2016 Q3 2015 % change
01-09
/2016
01-09
/2015
% change
Sales 634 631 0% 1,874 1,927 -3%
EBITDA
118 102 16% 330 294 12%
EBITDA margin (%) 18.6% 16.2%   17.6% 15.3%  
EBIT
86 69 25% 234 196 19%
Capital Employed       1,798 1,833  
Average Capital Employed       1,763 1,851  
ROCE (%)       17.7% 14.1%  
Total Working Capital
      333 332  
Total Working Capital as % of Sales1       13.1% 13.2%  

1) Annualized last quarter sales

Q3 2016 sales were in line with Q3 2015, with 5% volume growth driven by specialties compensating for 5% lower prices, which reflected lower input costs. The currency effect was slightly negative in Q3 2016 driven by the US dollar.

  • DSM Engineering Plastics:
    Volumes were slightly up compared to Q3 2015 driven by growth in specialties, partly offset by planned lower volumes in polyamide 6 polymers. Sales in automotive in the US and Europe were good, and stable in China. Sales to the E&E segment improved in Q3, but were still slightly below the same period last year.
    Prices were lower reflecting lower input costs, notably in polyamide 6.
  • DSM Resins and Functional Materials:
    Volumes were up in all segments compared to Q3 2015.The quality of the mix improved further. The business group benefited from improving conditions in the European building & construction markets. Specialty Resins made good progress in China and the US. Functional Materials delivered another quarter with growth in fiber-optic materials.
    Prices were lower reflecting lower input costs.
  • DSM Dyneema:
    Sales were slightly up, with strong growth in life protection, for law enforcement and personal protection, partly offset by weak sales in high performance textiles and commercial marine. Sales to the performance apparel segment are developing well.

Q3 2016 EBITDA increased by 16% compared with Q3 2015 as a result of disciplined margin management, strong growth in the specialty segments, lower input costs, and the benefits of the efficiency and cost saving programs carried out over recent years.

Q3 2016 EBITDA margin was particularly high at 18.6%, up from 16.2% in Q3 2015 (and 18.3% in Q2 2016), reflecting a very favorable mix, while still benefiting from low input costs.

Innovation Center

in €
million
Q3 2016 Q3 2015 % change
01-09 /2016 01-09
/2015
% change
Sales 43 42 2% 126 115 10%
EBITDA
1 0   2 -8  
EBIT
-5 -7   -15 -29  
Capital Employed       553 563  

Q3 2016 sales were 2% above Q3 2015, with the increase fully driven by higher volumes in DSM Biomedical. EBITDA was slightly positive compared to the same period last year.

Corporate Activities

in €
million
Q3
2016
Q3
2015
01-09
/2016
01-09
/2015
Sales 18 19 57 55
EBITDA
-27 -28 -78 -88
EBIT
-35 -38 -103 -121

Q3 2016 EBITDA improved by €1 million compared to Q3 2015.

Key Joint Ventures and Associates

in € million, based on 100% Q3 2016 Q3 2015 % change
01-09
/2016
01-09
/2015
% change
DSM Sinochem Pharmaceuticals
           
Sales 103 103 0% 329 332 -1%
EBITDA% 13% 10%   14% 13%  
Patheon1
           
Sales 425 403 5% 1,216 1,177 3%
EBITDA% 24% 23%   20% 20%  
ChemicaInvest2            
Sales 408 365 12% 1,300 365 n.a.
EBITDA%3 5% 3%   3% 3%  

1) Patheon (formely reported as DPx Holding) respective periods are for the 3rd quarter from 1 May - 31 July and
for YTD from 1 November - 31 July"
2) ChemicaInvest in 2015 refers to the period from 1 August - 30 September
3) Q3 2016 EBITDA before PPA adjustment

  • DSM Sinochem Pharmaceuticals (50% DSM) delivered solid results in line with previous quarters.
  • Patheon (33.5% DSM) delivered strong results.
  • ChemicaInvest (35% DSM) delivered slightly improved results, although caprolactam market conditions remained challenging.

Financial Overview

Exceptional Items

Exceptional items from continuing operations in Q3 2016 amounted to -€34 million (-€24 million after tax) which included €22 million of restructuring-related costs, and a €12 million asset impairment.

Exceptional items from discontinued operations amounted to -€28 million following adjustments due to various settlements relating to the divestment of DSM Fibre Intermediates and Composite Resins to ChemicaInvest.

Exceptional items regarding the Associates/Joint Control entities amounted to a net profit of €228 million, mainly comprising the gain on the IPO of Patheon for €232 million.

Net profit (continuing operations)

in €
million
Q3 2016
Q3 2015 01-09
/2016
01-09
/2015
EBIT 205 170 601 458
Financial Income & Expense -30 -28 -96 -115
Income Tax -32 -25 -93 -62
Effective Tax Rate (%)     18.5% 18.0%
Share of profit of associates / Joint control entities 3 -11 -22 4
Non-controlling interest -3 0 -5 3
Net Profit from Cont. Operations (before exceptional items)1 143 106 385 288
Net Earnings per ordinary share - Cont. Operations, before exceptional items (€) 0.81 0.59 2.17 1.61

1) Net profit of continuing operations attributable to equity holders of Koninklijke DSM N.V.

Financial income and expense amounted to -€30 million in Q3 2016 compared to -€28 million in Q3 2015, mainly as a result of some unfavorable hedge results (€4 million) which were almost compensated by lower interest expenses (€3 million).

Cash Flow, Capital Expenditures and Financing

in €
million
Q3 2016 Q3 2015 01-09
/2016
01-09
/2015
Cash from Operating Activities - Continuing Operations 325 300 644 487
Total Working Capital - Continuing Operations     1,528 1,443
Total Working Capital as % of Sales - Continuing Ops.     19.1% 18.6%
Capital Expenditure (cash, net of customer funding) - Continuing Operations 128 113 305 321
Net Debt (before reclassification to held for sale)     2,054 2,3211

1) Year-end 2015

Cash flow from operating activities amounted to €325 million showing an improvement of €25 million compared to Q3 2015.

In Q3 2016 a €750 million bond was launched with a ten-year maturity, at a coupon of 0.75%. This bond issue took advantage of favorable market conditions and allowed the company to lock in low interest rates taking into account the maturing of a €750 million bond in 2017.

Total Working Capital amounted to €1,528 million at the end of Q3 2016 compared to €1,443 million at the end of Q3 2015, which represents 19.1% as a percentage of annualized Q3 sales (Q3 2015 18.6%).

Net debt decreased by €267 million compared to the end of 2015 and stood at €2,054 million. The decrease was mainly due to the receipt of dividend and proceeds from the secondary offering of Patheon in total of €235 million.

This quarterly report has not been audited.